UK DIY News

Overall inflation remains at 4.5%

The official governmental measure of inflation the Consumer Price Index (CPI) remained at 4.5 per cent during May, according to the Office for National Statistics.

There were many pressures both negative and positive on prices, with food & non-alcoholic beverages the largest upward pressure to CPI, but the overall level of inflation stayed static.Prices in this section grew 1.3 per cent between April and May this year, compared to a 0.1 per cent fall during the same period a year ago.

Price growth in furniture, household equipment and maintenance goods slowed down, from 1.2 per cent last year to 0.4 per cent, whilst transport services were the largest downward pressure on the overall rate.

“May’s UK consumer prices figures, showing the headline rate steady at 4.5 per cent, are in line with the median forecast but disappointed our own hopes for a small fall,” said Jonathan Loynes, Chief European Economist at Capital Economics.A continued rise in inflation, well above the government’s target of two per cent, could force the Monetary Policy Committee (MPC) to raise interest rates before the end of the year, but this is looking very unlikely.

Although Capital Economic still believes inflation will rise above five per cent in late summer due to growing food costs and rising energy prices, it believes the increase will be temporary.Loynes added: “With recent signs that inflation expectations are falling, the MPC should continue to hold its nerve and leave interest rates unchanged.”

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